While the technical specifications and modes of interaction with modern computers and gaming systems continue to advance, we are still quite a long way from graphics, sound, and user interface that provide a life-like experience. Even so, a properly programmed virtual world could be extremely immersive if the focus was in the right place. Imagine a game world where it is impossible to tell which characters are controlled by real humans. If the ugly troll might be your cousin, and that swamp rat could be your neighbor's pet, while the friendly paladin might simply be a computer character, the world suddenly has some moral ambiguity.
The key to a new breed of virtual reality is the Turing test. Simply put, the idea is that a true test of artificial intelligence is whether you can interact with it and a human being and not know which one is the computer.
Most of the immersive games up to this point have primarily focused on hack and slash. World of Warcraft (or a decade ago Diablo II) allowed people to create a virtual personality and go around looking for evil to slay and treasure to liberate. Other virtual worlds focus only on the social aspect. Services like Second Life let people set up homes and environments and communicate via avatars. The web site, Virtual Worlds Review, lists almost 30 such games.
Some single player games have started to introduce the idea of players choosing their character's morality. Most notable in this genre are Black & White and Fable. Both have sequels in the works. These games were novel in their approach to the characters' interaction with the world. Stealing, killing civilians, and other "evil" acts are allowed. The game tracks a characters' behavior and changes accordingly.
While it is a start for games to apply their own interpretation of ethics, having the world apply real, natural consequences seems even more interesting. If you have no idea whether that troll is computer- or human-controlled, attacking it without provocation becomes much more problematic. Say you kill a real player's troll character. He may have friends or family in the game or even the ability to be resurrected. Those characters could either seek revenge or go through the legal system and seek justice.
This would lead to many new types of game play. Being a thief stealing from both "real" and artificially intelligent shopkeepers adds a new level of potential danger. Some characters might specialize as bounty hunters, tracking down the miscreants. Even the details of a world could vary to increase player interest. Some communities could be frontier towns with only personal revenge type justice, similar to the Old West. Others would be more "civilized" and have complete systems of laws and consequences. Racial prejudice from place to place or outright war would add further interest.
All of this could be realized with existing technology if only people were allowed to play a wide variety of roles in the virtual world and the computer characters became smart enough to blend in with the humans. If Turing is satisfied, the game world would be very satisfactory.